The future of book retailing

On the surface 2 contradicting and rather striking news items emerged over the last 2 weeks. First there was the message that Borders UK went into administration. Apparently the company had suffered from increased competition from online retailers and supermarkets. Just a week later rumours appeared that Amazon was looking for physical outlets in the UK. So after Borders UK fails to make money out of  brick&mortar shops, Amazon (still 100% online) seems to be moving into b&m?

Amazon opening outlets in the UK may appear as a thumbs up towards the retailers heavily depending on their b&m stores: apparently e-tailers cannot cope without b&m shops. Even if Amazon makes such a move  the conventional retailers are still light years away from companies like Amazon. e-tailers typically work with margins <15%, retailers on the other hand need >25% to sustain their organisations. Many of the book retailers have by now moved into online sales as well but their cost structures did not change. On the contrary: moving into e-tailing requires considerable investments in IT and personnel over a longer period of time without getting immediate returns.

Amazon on the other hand will continue to dominate online sales and will only open physical stores in small numbers initially. They will continue to do so only if the shops really add value to their online business. For Amazon b&m shops are an extension of their successful online business. For the conventional retailers their b&m core business is being threatened and their move to online is a difficult step into a new world dominated by strong players and different rules.

What's next? The future looks bleak for b&m retailers. e-books will make things worse for conventional retailers. It is obvious that consumers will buy e-books via internet, the domain of Amazon. Digital natives becoming the dominant consumers in the coming 20 years is another powerfull force towards e-tailing. Retailers will have to start making changes quickly now they still can. Moving to a cost structure that is more in line with their online-only competitors is key to their survival even if that means making drastic cuts in the number of their physical outlets. Else there will be more companies following the path of Borders UK.

What publishers should understand about "Nowism"

Trendwatching.com, one of the world's leading trendwatching organizations came up with the trend "Nowism" in their November report. Relevant to any company focused on consumers the trend description offers a lot to learn for companies involved in the book industry as well.

Nowism is described as: "Consumer's ingrained lust for instant gratification is being satisfied by a host of novel, important (offline and online) real-time products, services and experiences". Key in the description is "instant gratification": consumers wish to instantly get something the moment they actually want it. Trendwatching.com claims, and I tend to agree with them, that this lust for instant gratification is nothing new but has been and still is ingrained in the mind of consumers. However, with digital technology progressing consumers no longer have to physically go to a business outlet for their intant gratification but their desire can nowadays be satisfied via a multitude of digital platforms and services.

Nowism explains the popularity of smartphones but also the growth in the e-reader segment. Small (if possible pocket size) devices with wireless connectivity allow consumers to satisfy their lust for information/content/entertainment 24 hours a day, 7 days a week and at any location around the world. The attraction of these connected devices as a tool for instant gratification for the consumer also brings an enormous potential for companies involved in the content and media industry.

For authors, publishers and book retailers it means that the digital revolution we are in is not just a transition from paper to ebook. These parties have to realise that the complete Reader Experience is being affected by digitisation: from orientation to purchase of a book and from reading to sharing experiences. For every element of the Reader Experience consumers are looking for instant gratification:

orientation:  looking for book reviews /recommendations on the (mobile) internet
purchase and delivery:  delivery of an e-book should only be 2 mouse clicks away
reading:  having the option to read from multiple devices
sharing experiences:  sharing via social media / digital book clubs

At the end the company that can best satisfy consumer's lust for instant gratification during the complete Reader Experience will become the winner of the digital revolution. I expect that in many cases these winners will not have made their money from paper books....